Facts of the Case

The assessee, a partnership firm engaged in brick kiln business, did not file its return of income for Assessment Year 2015-16. Reassessment proceedings were initiated under section 147 of the Income-tax Act, 1961 by issuance of notice under section 148. In compliance, the assessee filed its return on 31.01.2023 declaring total income of ₹1,11,510.

The Assessing Officer completed the assessment ex-parte under section 147 read with section 144B on 08.03.2023 and made an addition of ₹52,00,500 on account of cash deposits in the bank account, treating the same as unexplained money under section 69A. The assessee’s appeal before the Commissioner of Income Tax (Appeals), NFAC, was dismissed vide order dated 08.01.2025. Aggrieved, the assessee preferred an appeal before the Tribunal.

Issues Involved

  1. Whether the reassessment proceedings initiated under section 147 were valid in law.
  2. Whether addition of ₹52,00,500 under section 69A for cash deposits in bank account was justified.
  3. Whether cash deposits claimed to be business sales could be accepted in the absence of reconciliation and supporting evidence.

 Petitioner’s (Assessee’s) Arguments

The assessee contended that the reassessment proceedings were invalid and that no proper satisfaction regarding escapement of income was recorded. It was further argued that after filing the return in response to notice under section 148, no notice under section 143(2) was issued, rendering the assessment void.

On merits, the assessee submitted that the cash deposits represented sale proceeds of the brick kiln business and could not be treated as unexplained income. It was also contended that the difference between bank deposits and sales disclosed was duly explained and arose from definite sources.

Respondent’s (Revenue’s) Arguments

The Revenue relied upon the assessment order and the appellate order of the CIT(A), NFAC, contending that the assessee failed to reconcile the bank credits with disclosed sales and did not produce details of sales, purchase of materials, or generation of cash. It was submitted that in the absence of supporting evidence, the addition under section 69A was rightly made and confirmed.

Court Order / Findings

The Tribunal noted that no one appeared on behalf of the assessee at the time of hearing. After considering the material available on record and the reasoning given by the CIT(A), the Tribunal held that the appellate order was just, fair, and well-reasoned.

The Tribunal observed that the assessee failed to reconcile cash deposits of ₹52,00,500 with disclosed sales of ₹62,97,000 and did not furnish evidence of purchase of materials, sale details, or generation of cash from business operations. In the absence of any material to rebut the findings of the lower authorities, the Tribunal upheld the order of the CIT(A) and dismissed the appeal.

Important Clarification

The Tribunal clarified that where an assessee claims cash deposits as business receipts, the burden lies on the assessee to substantiate such claim with proper reconciliation, books of account, and supporting evidence. Failure to do so justifies addition under section 69A as unexplained money. In the absence of contrary material, well-reasoned orders of the lower authorities will not be interfered with.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770633001_SANGAMEANTAUDYOGPRATAPGARHVS.FQy4HArVdBbZ87AHrbfdhSXRgyE5NUbrh6GaL8enMUeh.pdf

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